Debates of June 6th, 2002

Government Contracts

[Ralph Goodale, Liberal, Minister of Public Works and Government Services]

Mr. Speaker, I do not know how I could be any clearer. I said that I expected the people in my department to follow my wishes in this matter. I know that they will because they will fulfill my expectations. Wherever there is presently some kind of transaction in process, I will review it personally on a case by case basis to do the right thing.

Employment Insurance

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC]

Mr. Speaker, on August 20 of last year, the Minister of Human Resources Development confirmed to me that the Employment Insurance Act needed amending to rectify the discrimination suffered by women who qualify for Quebec's precautionary cessation of work program, and are denied employment insurance benefits as a result.

Today, nearly one year after admitting there was a problem, is the minister ready to introduce a bill and pass it immediately to stop penalizing women in Quebec?

[Jane Stewart, Liberal, Minister of Human Resources Development]

Mr. Speaker, let me advise the hon. member that I remain committed to ensuring that every woman has full access to the parental benefits that are in place. Regardless of the fact that we are talking about a small number of women who do not have full access to those benefits, every single parent should have the benefits of our services and we will find a way to ensure that.

Research and Development

[Brent St. Denis, Liberal, Algoma—Manitoulin, ON]

Mr. Speaker, yesterday the space shuttle Endeavour blasted off on a flight to the international space station to deliver a mobile base that will help build the station in orbit. Given Canada's excellent aerospace reputation, can the minister responsible for science, research and development tell the House how Canadian industry has contributed to this mission?

[Rey D. Pagtakhan, Liberal, Minister of Veterans Affairs and Secretary of State (Science]

Mr. Speaker, Canada is proud to support research and development.

This first railway in space is contributing to the development of the space station and to building partnerships. Wardrop Engineering of Winnipeg and MD Robotics of Brampton working in partnership have made this advance in science a reality.

Government Contracts

[John Duncan, Canadian Alliance, Vancouver Island North, BC]

Mr. Speaker, the auditor general referred the Groupaction contracts to the police. She found their work to be deficient. Here is what she said:

In summary, we saw very little evidence in the report that all significant contract requirements were met.

Groupaction did not meet contract requirements. Why are we still giving it contracts? We fully expect the minister to give us an unequivocal answer. Will he cut them off now entirely?

[Ralph Goodale, Liberal, Minister of Public Works and Government Services]

Mr. Speaker, what I have said is that with respect to all other business activities beyond the sponsorship, future project applications, proposals or submissions by Groupaction will be declined. There is an issue having to do with outstanding matters that are partway through and I am going to look at every one of those on a case by case basis. I do not know how I can be clearer.

Highway Infrastructure

[Jocelyne Girard-Bujold, Bloc, Jonquière, QC]

Mr. Speaker, on Monday the Deputy Prime Minister said in the House, and I quote, “much of the strategic infrastructure fund will flow to municipalities”. However, commitments made by Liberals with respect to funding for Quebec highways are in the order of $1.9 billion.

Given that the fund only contains $2 billion, it is clear that the Deputy Prime Minister will not have enough money available to fund all of his colleagues' commitments.

Given this fact, will he tell us once and for all what the real intentions are for this fund? Which projects will be a priority?

[John Manley, Liberal, Deputy Prime Minister]

Mr. Speaker, unfortunately it is still a bit too early for me to indicate priorities. I hope to have all of the parameters of the program ready for the House and the public shortly. As soon as the program has been approved by cabinet, we will be able to start determining which projects will receive funding.

Canada Post

[Joe Comartin, NDP, Windsor—St. Clair, ON]

Mr. Speaker, my question is for the new finance minister.

Does he know why our Canadian stamps are being made in the United States? Does he know why they do not contain a country of origin label, or is he just too busy with all his other responsibilities? Could the minister give us an answer?

[John Manley, Liberal, Deputy Prime Minister]

Mr. Speaker, perhaps the member may not have heard my previous answer but he can refer to the blues.

However I am sure he does know that crown corporations, such as Canada Post, operate independently and at arm's length from the government.

I indicated to him the role the board of directors play in the approval of contracts. I am sure he would not be one to recommend political interference with the granting of contracts by a crown corporation. I hope not.

Fisheries

[Gerald Keddy, Progressive Conservative, South Shore, NS]

Mr. Speaker, my question is for the minister of fisheries.

It is critically important for the survival of Atlantic salmon that the west Greenland fishery be shut down entirely and immediately. Every fish caught off Greenland is one less fish returning to the seriously threatened salmon rivers of Nova Scotia and eastern Canada.

Will the minister of fisheries support the position of the Atlantic Salmon Federation in calling for a zero quota for the west Greenland fishery? Will he lobby NASCO this week to end the Greenland salmon fishery?

[Robert Thibault, Liberal, Minister of Fisheries and Oceans]

Mr. Speaker, I can assure the member that our negotiators will be putting forward a position for as low a harvest as possible.

We recognize in trying to achieve a multi-year deal that there might be a requirement for a food fishery or a minimum fishery by some partners over there. However our preference would be that there be no fishery whatsoever. We cannot give away all the details prior to those negotiations because we do not want to prejudice the outcome.

Business of the House

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

Mr. Speaker, there have been negotiations among political parties. I believe all opposition parties have a copy of a motion for which there has been tentative agreement. I would now like to offer it to the House. I invite them to consult a copy of the document that we have put together.

I ask for unanimous consent for the following motion. I move:

That, notwithstanding any standing order or usual practice, in consideration of the report stage of Bill C-5, an act respecting the protection of wildlife species at risk in Canada, the texts of report stage Motions Nos. 35, 84 and 96 shall be altered to read as provided in the document entitled “Proposed Revised Report Stage Motions at Report Stage of Bill C-5”, tabled in the House of Commons earlier this day on June 6, 2002, provided that these motions shall be deemed to remain in the same status for consideration by the House as the unaltered versions of the motions were at the time of the adoption of this order.

[The Deputy Speaker]

Does the House give its consent to the minister of state to table the motion?

[Some hon. members]

Agreed.

[The Deputy Speaker]

The House has heard the terms of the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[An hon. member]

On division.

(Motion agreed to)

[John Reynolds, Canadian Alliance, West Vancouver—Sunshine Coast, BC]

Mr. Speaker, now that we have settled that issue, I wonder if the government House leader could explain what the business will be for the rest of this week and next week?

Maybe the minister could also let the nation know, from the exciting question periods we have been having, that we have about 11 more left. Could he assure us that we will get all 11 of those in before we go home to work for the summer.

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

Mr. Speaker, I do not usually comment on the content of question period. We all have our own views of how good or bad they were. I will instead refer to the government's legislative program.

This afternoon and this evening we will consider the business of supply with the opposed motions and so on. That takes place as it does normally, with the later completion of the appropriations bill.

Tomorrow we will do the following business. I would like to first call Bill C-53, the pest control bill, at report stage. Once that is completed we will then call Bill C-55, the public safety legislation. I believe those two bills should complete the day tomorrow.

Next Monday it is my intention to call the report stage of Bill C-5 and third reading of Bill C-5 on Tuesday.

On Wednesday of next week and/or after the completion of Bill C-5, I would then call Bill S-41 respecting legislative language. We will consider at that point an address to Her Majesty concerning the jubilee.

Once that is completed, and in the event the House wants to continue with other business, the bills I would call next Tuesday, subject of course to consultation between House leaders, would probably be the following: Bill C-19, the environmental protection legislation; Bill C-48, the copyright bill; and possibly Bill C-54, the sports bill which I understand should be out of committee sometime within the next short while.

That is the business I propose to call after we complete the address to Her Majesty that I described.

I also intend to consult with opposition House leaders to see if it is still their wish to hold the take note debate next Wednesday on the future of Canada's health care system.

The House resumed consideration of the motion, and of the amendment.

Supply

[Paul Szabo, Liberal, Parliamentary Secretary to the Minister of Public Works and Government Services]

Mr. Speaker, as I had just begun my speech prior to question period I think it would probably be worthwhile to do a quick summary of the issue.

First, the motion has to do with an overpayment by the federal government to four provinces with consequences to all provinces. The motion reads:

That, after overpaying at least $3.3 billion to several provinces as a result of its own accounting errors, this House calls upon the government to forgive any past revenue overpayments to the provinces since retroactively clawing back these revenues would severely affect the provinces' ability to pay for healthcare, education and social services.

This would have some very interesting ramifications, as members have raised in their debate. I think it bears identifying exactly the nature, because I am not exactly sure that these are accounting errors.

In January 2002 the Canada Customs and Revenue Agency, commonly referred to as CCRA, identified a problem in tax accounting that resulted in overpayment to six provinces under tax collection agreements.

The federal government collects income taxes from individuals on behalf of provinces and remits the money to those provinces following the tax year. The Department of Finance pays the appropriate share of those taxes collected to the provinces based on the records of the CCRA.

The four provinces that are significantly affected are Ontario, Manitoba, British Columbia and Alberta. Those are provinces where mutual fund trusts are primarily based. New Brunswick and Nova Scotia received very minor overpayments.

Mutual fund trusts are a type of collective investment vehicle allowing Canadians a simple way to invest indirectly in a broad range of stocks and bonds in a number of different markets. That is not the issue. Preliminary estimates in January 2002 indicated that a total of $3.3 billion had been overpaid for the 1993 to 1999 income tax years.

The auditor general studied the CCRA accounts to confirm the scope of the problem. I think it was important that the work had been done to ensure that there was an understanding that the problem identified was verifiable. Her report of June 3 gave complete assurance that there had been $2.5 billion in overpayments in the period from 1996 to 1999 and it gave partial assurance that over $800 million was overpaid in the period 1993 to 1996.

CCRA's accounting practices applicable to mutual fund trust capital gains refunds have been revised to avoid a similar omission in the future. So corrective action has been taken with regard to the matter which actually led to this overpayment. The auditor general confirmed that the practices were corrected.

The problem for many years was virtually undetectable. Each year the public accounts of the Government of Canada and all its departments and agencies are audited and they are signed off by auditors that they fairly reflect the financial activity for the period under audit. The Government of Canada relies on those audits and relies on them not only with regard to the activity in a particular department, agency or its own public accounts, but that it has consequences to other matters, such as in the event that equalization payments, for example, could be affected in a ripple effect. If this problem had not occurred, the amount, for instance, that was paid to provinces with regard to equalization payments might also have been different. In fact, that is the case.

The overpayments to the provinces are as a result of a tax accounting omission in the Canada Customs and Revenue Agency reports.

The Department of Finance uses those reports to determine how much tax revenue it should be distributing to the provinces. Mutual fund trusts pay federal and provincial tax on capital gains and under circumstances set out in the income tax legislation they can receive a refund in both federal and provincial portions of this tax paid once investors realize the gains and pay the tax themselves.

Due to a problem in the CCRA the provincial portion of capital gains refunds for mutual fund trusts was being deducted from federal revenues instead of provincial revenues. These processes are audited by the auditor general and they have nothing to do with individual taxpayers. It is a consequence of all the tax collections that are collected on behalf of provinces by the federal government.

In the course of enhancing the computer systems the CCRA identified the problem and upon confirmation reported it to the Department of Finance and the auditor general. As soon as the auditor general confirmed that the problem was real the overpayment was immediately corrected on a going forward basis at least as of the 2000 taxation year. The auditor general was requested to study the CCRA accounting procedures and provide reports and analysis. The auditor general delivered her report on June 3, 2002.

Let us look at the amounts more specifically. There is no question that $3.3 billion is an awful lot of money. This relates to the years 1993 to 1999. The provinces affected were Alberta, British Columbia, Manitoba and Ontario.

In Ontario's case the overpayment was $2.8 billion. That is a vast majority of the amount we are talking about. As a member of parliament from the province of Ontario I obviously have a concern and an interest in seeing that Ontario is kept in good shape and that it gets its fair share. I would never argue that Ontario should get what it is not entitled to.

Manitoba's overpayment was $400 million. It has a smaller population than most provinces however $400 million is a material amount to that province. B.C. was overpaid by $120 million, a little lesser impact, nevertheless governments can do a lot in a province with $120 million. In Alberta's case the overpayment was only $4 million. This gives us an idea of the dimensions. The problem is certainly with Ontario.

The government has identified a problem and taken appropriate action. The auditor general has introduced changes ensuring that this matter would not get exacerbated or there would be further overpayments. Discussions were immediately launched with the provinces to determine how to approach this.

The federal and provincial governments have agreements on a number of matters, not simply tax collection, tax law and other law, but virtually on every aspect of fiscal and social policy across Canada. That relationship is important and cannot be taken in isolation.

The motion before us suggests that correcting this problem would impair, impede or somehow compromise a province's ability to take care of its other responsibilities like health care, education, social services and everything else that provinces deliver to Canadians.

What is the impact? We have a situation where legitimate federal government moneys were inadvertently paid to these provinces. I indicated earlier that there also is a consequential impact on things like equalization payments. Every other province that receives equalization payments has now received an amount which would have been different had the situation been handled correctly in the first place. We have some consequential effects as a result of this overpayment. We must carefully examine the impact on all provinces, not simply the poor provinces to whom overpayments were made.

I am sure that hon. members will recognize this is a difficult and complex question that cannot be resolved by a simple motion to suggest we forgive it and go on. The federal government has its responsibilities. We have programs, services and obligations on a national basis which also must to be funded and we must think about some of the principles.

I would like to talk about some of the principles that we ought to consider when we are dealing with matters such as this. I suggest materiality has a lot to do with it. In the event we were to have anything which was of an inconsequential amount it would be unlikely that the government would dedicate substantial resources to resolve a problem for which the cost of resolving would be more than the amount involved in the first place.

Materiality is a fairly important issue. I suspect that members would agree that if the amount in question were one dollar this would not be an issue. I am sure that it would be a matter that could be resolved quickly simply by an internal adjustment.

What if it was a million dollars? All of a sudden that becomes a lot of money to a lot of people depending on the circumstances. Would we be prepared to make concessions or eat it? Sometimes businesses refer to it that way. They say that they will eat the loss because it was their mistake. Sometimes it is a good business practice or a good faith gesture to say that we made a mistake.

I would like to give an example of the principle of detrimental reliance. If individuals received a million dollars that they were not entitled to and they went out and invested in a $10 million investment using that money and had no other way to get that last million dollars because if it was taken away they would be in default of their loan and lose their business, then we could rationalize that over the long term with all things considered and it might be appropriate to take the hit and not try to recover it.

We know a dollar will not make us do anything. I am not sure whether a million dollars will make us do anything but it might start us thinking. However what if it was a billion dollars? It becomes a billion dollars in the Government of Canada's public accounts that is not available which otherwise should be available to pay down debt, invest in health care, social programs, or affordable housing and the homelessness issue. I can think of some important priorities that a billion dollars can be applied to. This matter is $3.3 billion. It is a lot of money and a lot of programs could be run with $3.3 billion. It is regrettable.

It is further exacerbated that whenever these things occur there is interest associated with the moneys, the time value of money. The $3.3 billion does not even include all of the interest that could have been earned on that money or saved had that been used to pay down debt for instance. It is not insignificant. The $3.3 billion is not the total amount but the initial amount. I imagine that if we were to do the math it would be closer to $4 billion than $3.3 billion.

The question is: At what level does the government want to change the decision? There are certain circumstances and levels of dollars where we might say we made a mistake and it is not worth the effort to fix it. It gets to a point where we would look at negotiating a settlement because we do not want to spend too much money on it. Then it gets to the point where there are large enough dollars that there has to be some principles. What threshold will we set? I am not sure members have thought about what that threshold should be.

This particular motion has said, notwithstanding anything else with the $3.3 billion, we will not be concerned about the amount the federal government will lose in revenue and it should be forgiven. Therefore, the threshold of at least $3.3 billion is inconsequential to the opposition and it wants the government to let it go to the provinces. I am not there.

In the laws of Canada, where there has been an injustice, there is a principle that the dispute resolution is to put the parties back in the situation they would have been in had the matter been treated properly in the first instance, to the greatest extent possible.

There is no question in this regard that it is totally possible for the moneys to be totally recovered by the federal government, as is its due. But the federal government has broader relationships with the provinces. Some discussions which are going on now are necessary because I do not think there would be any intent on any level of government to try to put another jurisdiction in a situation which would be untenable or would damage its ability to do the work that is essential on behalf of all Canadians regardless of the level of government in which its delivered.

Canadians are somewhat insensitive to the level of government that manages their money. They pay taxes and want assurances they get good value for the dollar. Canadians at large will not lose anything. It is a matter of whether or not the federal government has a responsibility to set a standard or consensus point. There may be a certain level beyond which the government should not be taking the hit for inadvertent accounting errors, albeit made in good faith, but should instead seek a negotiating point.

I am a chartered accountant by profession and have appeared before the former National Revenue Department and the CCRA on tax disputes. The laws of Canada are clear. Once an assessment is received it must be paid first before it is challenged in court.

We recover things on welfare, EI payments, GIS overpayments, OAS overpayments, income tax shortfalls and income tax overpayments. There are all kinds of things but they follow the general principle of law that where there is a mistake we correct the mistake. We correct it with interest where applicable, and sometimes with penalties. No penalties apply here because the provinces who received the overpayment were not involved in the transaction. They relied on receiving those moneys in good faith and maybe to their detriment they have invested or used the money.

I do not think that is the case in Ontario. It involved $2.8 billion. The analysis I saw indicates that the province of Ontario has not even spent all the money that it received from the federal government for new medical equipment et cetera. It put it in bank accounts. I think $500 million went into bank accounts and it forgot all about it. It was just collecting interest.

I do not think there has been a clear demonstration that there will be an impairment in the province of Ontario if there is an orderly repayment, just as the federal tax department would do for individuals who owe them a lot of money. It does not say to them to pay it all right away or it will throw them in jail. An agreement would be reached to have an orderly repayment so that the person continues to earn an income and repays it in an orderly manner. There are principles involved. It is not cut and dry. I do not believe, even as an Ontarian, that forgiving it is the solution.

[James Rajotte, Canadian Alliance, Edmonton Southwest, AB]

Mr. Speaker, the member said it may be more than $3.3 billion, it may be upwards of $4 billion going back to 1972. I do not know what it would be if it was more than $4 billion. Could the member confirm that he did say that it would likely be more than $3.3 billion?

I must admit that I was a little disturbed by the cavalier way in which he seemed to be treating the $3.3 billion mistake by the federal government. I did not hear him admit that it was a mistake by the federal government.

First, he should admit that. He said something to the effect that one jurisdiction would not want to put another jurisdiction in a tough position in terms of providing services. We agree with that but based upon the fact that the federal government made the mistake, is the federal government not the party that should be penalized to the greatest extent for this?

Using that logic, and I agree with it, how does he explain the federal government's position on health care, seeing that it is paying about 14% of the cost and it had agreed to pay 50% of the cost?

The hon. gentleman said justice seemed to be going back to what it would have been had the situation been fair. That is one version of justice but there is another version of justice. Is the party that commits the offence, or the party that fails in its duty or responsibility, not the party that should accept responsibility?

Accepting responsibility is at the heart of the motion. The federal government should stand up and accept responsibility for making the mistakes. I would like the hon. member to comment on that.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, the $3.3 billion could become much higher. It could be closer to $4 billion.

The information that was given to us from the auditor general is that there were overpayments. The cumulative overpayments for the years involved are $3.3 billion. Clearly that does not include the interest that would be earned on those moneys all those years by the federal government either by investment or by reduction in its debt. There is a value. Even taxpayers who overpay taxes will get it back with interest when they get their refund. Similarly if they have a shortfall in their instalments or whatever, they will have to pay interest. The differential would simply be the time value of money.

I understand the member would like to suggest it was the government's mismanagement, the government's error and therefore the government should just eat it. It was not the Government of Canada. It was an agency of the CCRA that had a computer problem. It did not deliberately do anything.

Each of the years was audited by the auditor general. The Government of Canada relies on the auditor general to safeguard, to protect, to ensure and to check that these things are correct.

The Government of Canada relies on the auditor general to opine on the correctness of the account. The Government of Canada relied on the auditor general. The auditor general did not see it. When the computer systems were being updated, a computer error was found. It has been corrected. It will not happen again.

To suggest that there was some malfeasance on behalf of the government is a bit of a stretch. There is a detrimental reliance not only by the federal government with regard to the auditor general's reports and assurances that there were no problems, there is also a detrimental reliance by the provinces because they received the money in good faith as well. The principle of detrimental reliance and who relied on whom is very important in the discussions.

With regard to the funding of health care, the 14%, the member is correct, it is 14% of cash. We have had this debate many times. The tax points are worth so many dollars. In fact the federal government is the sole funder of aboriginal health issues. The federal government is the sole funder of research and the health protection branch and all those other things. If we were to add these things in, it is over 40% of the funding of Canada's health care system.

I received charts during the cabinet briefing which show the components, the tax points, the aboriginal health issues and all of the other direct expenditures, including something as simple as the anti-smoking campaigns that the federal government has been funding for so many years. That is an investment in the health of Canadians.

The member should not misstate the facts by suggesting this is all the cash. If that is his position, perhaps he would agree that we should terminate the tax point arrangement, i.e., the taxing authority the federal government gave to the provinces. Let that revert to the federal government and the federal government will give them the cash.